Week in FX Asia – The Kiwis Gave Us “The Hobbit” And Now An Expensive “Dollar”

February 1, 2013 Share Print 0

While the Yen is getting battered against all currencies on the grounds that the Japanese government wants that to be so, the Kiwi is rallying. Governor Wheeler at the RBNZ has been the main catalyst for this appreciation. All week the market has heard hawkish comments come from his office.

On Wednesday, the RBNZ chose to leave the OCR unchanged at +2.5%. The Governor is bullish about New Zealand’s economy, saying “economic indicators are improving here and with many of our trading partners” and “positive global sentiment is resulting in lower bank funding costs and reduction of credit costs for both households and firms alike.”

The Governor “does not want to see financial stability of inflation risks accentuated by housing demand getting too far ahead of supply.” The central banks’ own analysis suggests that GDP growth is recovering, as business confidence and construction activity has picked up, while inflation is subdued due to “overvalued New Zealand dollar.”

In other words, policy makers do not want to adopt “loose monetary policy for fear of inflation”. Despite the weak labor market, the Kiwi’s economy is strengthening even without policy makers doing anything.

Such language is giving market participants the confidence to own more of the currency.

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Kiwi Dollar Eases Back to 0.8370 Before NZ Reserve Bank Meets Tomorrow
Singapore Office Rents to Rebound as Supply Growth Abates
Asian Shares Rise Tuesday, however Investors are Cautious before US Data
Yen given free reign to weaken? G20 unlikely to admonish Japan over “Competitive Devaluation”
S.Korea Shows Signs of Improving Domestic Demand
South Korean 2013 revised growth estimate from 3.9% to 3%
Chinese Central Bank says Yuan “Close to Equilibirum”

WEEK AHEAD

* AUD Reserve Bank of Australia Rate Decision
* EUR Euro-Zone Retail Sales
* AUD Unemployment Rate
* GBP Bank of England Rate Decision
* GBP BOE Asset Purchase Target
* EUR European Central Bank Rate Decision
* CNY Consumer Price Index
* EUR German Consumer Price Index
* CAD Unemployment Rate

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Dean Popplewell

Vice-President of Market Analysis at MarketPulse

Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.